https://www.irs.gov/pub/irs-pdf/p970.pdf
Actually I just looked at the Pub 970 and the tax treatment of scholarships and grants. It does not seem to specify which fees are considered qualified education expenses for that purpose.
So I guess I would just add up tuition, fees, and books and subtract it from the total scholarships and grants.
Ok here’s the breakdown total scholarships 24350 and grants 535 equal 24885::: Total bill 18751.64 total refund check 6136.43 … spent 800 of it on books. So now I figure which fees are QEE
Let’s say his bill is broken down like this
Non QEE ( room board and other fees I’m assuming Are not QEE)
Total non QEE 5216.08
Housing 3322
Meal plan 1350
Meal plan tax 111.38
Parking permit 260
Athletic fee 240
Medical service fee 32.70
Total QEE fees tuition fees , library fee, student service student fees etc)
Total 13535.56
So I take 24885 minus 13535.58 minus Books 800 equals 10549.44 which is taxable … ok so now how much is AOTC eligible ?
If he had a full ride, then I’m not sure you can claim the $800 book expenses for AOTC.
Everything was covered by scholarships and grants. You didn’t pay anything out of pocket.
In your other son’s case, the TGTP covered tuition and fees, and the scholarships and grants covered room and board. Your son paid $500 for books out of pocket. So that can be claimed for AOTC.
@BelknapPoint, @twoinanddone, do you agree?
Ok back to son with full ride So once the 10549.44 money ( the part used for room and board and his refund check ) is taxable and he pays taxes doesn’t it become his money and when he buys books with it doesn’t it become AOTC eligible?
I just found this it’s very informative!
https://www.treasury.gov/connect/blog/Documents/Pell%20AOTC%204%20pager.pdf
I am not really sure at this point. I am hoping some other posters can chime in.
I always thought if you have all costs like tuition, fees, room and board covered, and even some leftover to cover books and other expenses, then there is nothing to claim for AOTC, because it is all from scholarship/grant money.
Some is not taxed, the part that covers QEE, and some is taxed, the part that covers non QEE.
Was wondering if you read the link I sent above ? … what do you think?
Yes, $24,885-13,535=$11350
If you want to deduct the books, you can take another $800 or you can leave that $800 as taxable and take the AOTC.
If this son’s scholarships and grants aren’t restricted just to tuition, you can ‘shift’ the funds to taxable and take the AoTC. For example, declare $14550 in taxable scholarship and use $4000 for the AOTC ($11350-$800+$4000)
Does your son have other income that would increase his total income to a higher rate? Do you (parent) have a high tax bracket that son will have to use to pay the kiddie tax?
@twoinanddone I am confused, so you are saying that if someone has a full ride, they can still get the full AOTC?
What is that $4,000 paying for, if everything is already covered?
@Raidermom22 sorry I just saw that link. Yes, it covers coordination of AOTC with Pell, but in your case I thought that Pell was already taxable because it paid for non QEE.
@ twoinanddone Yes can you explain how the shift works and how I can claim 4000 AOTC if I paid nothing out of my pocket? The full foundation scholarship paid it all for my son with the full ride scholarship .
https://www.irs.gov/credits-deductions/individuals/education-credits-questions-and-answers
This is what the IRS says regarding claiming AOTC without a 1098T. Your full ride son’s school is not required to issue the 1098T because his total aid exceeds his tuition and fees.
It says you can claim the AOTC even without the 1098T, if you can substantiate the payment of qualified tuition and related expenses.
But if everything was covered by scholarships and grant, then how would you do that?
If there were no education expenses that were paid out of pocket, I don’t think you can claim AOTC.
In your other son’s case, the TGTP paid for tuition and fees, the scholarship and grant for room and board, and your son paid for books out of pocket, so a $500 AOTC can be claimed.
I am not a tax expert, so I may be wrong.
Let’s say the scholarships covered all of tuition, fees, room and board, but didn’t cover books. Then you could claim AOTC on the books you paid for.
But your son had everything the school billed covered, and still received $6,000 in excess of that. So I don’t think you can claim AOTC in this case.
@BelknapPoint, would you agree?
What the link about Pell/AOTC coordination is saying, is that Pell can be allocated to QEE or non QEE to maximize education tax credits.
But in the examples given, the expenses weren’t all covered by scholarships and Pell.
Pell was allocated to tuition in one example and that resulted in no AOTC.
Pell was allocated to living expenses in another example, freeing up some QEE to be claimed for AOTC.
These examples don’t really reflect your situation though.
For son 1 you have a TGTP that is restricted by its use to tuition and fees, so all other aid (including Pell) becomes taxable because it pays for non QEE.
But the books are also QEE and were paid out of pocket.
So they can either be used to claim AOTC or reduce the taxable amount of scholarships.
For son 2 you have scholarships and Pell covering total COA (tuition, fees, room, board, $800 books, $5,200 misc expenses).
Only the part that covers QEE is nontaxable, and the part covering non QEE is taxable scholarship.
So the part that covers tuition, fees, and books would be nontaxable, and the part that covers room, board, misc expenses would be taxable.
And then you can’t claim AOTC.
That is my understanding of the rules, but I’m not a tax expert.
And if I’m wrong, please feel free to correct me.
All I am trying to do is provide possible examples of schools that (according to net price calculator) seem affordable for your budget.
Normally those schools might be out of reach financially, but with your great stats and $3,000 EFC, merit and need based aid from the schools, plus Pell, PHEAA and loan, can bring them into affordable range.
Now I don’t know if they have the major program that you are looking for, are close to or far from home, still accept (honors) applications, and still award merit.
So now that are some things you will need to find out.
You also need to think about what is more important to you.
A degree from PSU, then doing 1-2 year commuter branch campus and 2 year main might be the best option.
Or being in a city like Pittsburgh, so starting at Pitt Bradford and doing well and transferring to Pitt main might be the best option.
Or living on campus and staying all 4 years at a residential college. Then a school like SU or Lycoming or YSU might be the best option.
Important is what the schools can offer you, and what you want to achieve. There might be study abroad, student exchange and internship opportunities available, even if the school is not in a city.
I am sorry, post #52 was supposed to be a comment on a different thread…
I realized it too late to edit…